The United States escaped, in extremis, the danger of insolvency

On Thursday, after weeks of negotiations, the United States Congress suspended the country’s debt ceiling in extremis. According to the US Treasury, America, the world’s leading economic power, had only a few days until Monday, June 5, to avoid bankruptcy. The American press reminds us that the United States, like all major economies, or almost, lives on credit. However, unlike other states, America is under a legal constraint: the country’s debt ceiling, i.e. the maximum amount of debt, must be officially increased or suspended by Congress. From this legislative procedure, the Republicans, the majority in the House of Representatives, and its leader, Kevin McCarthy, made an instrument of political pressure against the Democratic President Joe Biden. A whole marathon consisting of countless meetings at the White House, debates in congressional committees, endless meetings and negotiations… All of Washington has been marked for several weeks because of the famous “national debt ceiling”. Although it often happens that last-minute agreements are still found on such a file, the debates had become so heated and difficult that the Fitch agency placed the American economy’s AAA rating “under watch” for the time being. Last Saturday, at a time when for some it had become inevitable that the country would become insolvent, an agreement was nevertheless reached, “with forceps” – say the American sources -. His text averted a catastrophe: the country’s coffers could be emptied on June 5, risking pushing the United States into insolvency. The consequences: unpaid wages, as well as pensions, the repayment of debts, the fulfillment of other financial commitments and the resort to extremely drastic measures. Such an unprecedented situation would have thrown American finances and the economy into the unknown, with international repercussions. Or, to avoid this scenario with potentially catastrophic repercussions, President Biden and the Republican leader of the House of Representatives reached a compromise.

Specifically, the text of the agreement allows the suspension for two years – so until after the presidential and legislative elections in 2024 – of the maximum value of the debt of the United States, which is currently 31,400 billion dollars. Instead, Democrats agreed to limit some spending, but not as much as Republicans had requested. That is why many of them opposed the agreement, both in the House of Representatives and in the Senate. A sensitive point of his for the left wing: the compromise includes some changes to the conditions imposed to benefit from some social aids.